AUDIT REPORT

AUDIT ON
ACCOUNTS
RECEIVABLE
For the month ended February 2022

ONI COSMETICS
COMPANY
AUDIT REPORT
DATE: March 2, 2022

TO: ONI COSMETICS

FROM: AUDIT COMMITTEE

SUBJECT: AUDIT OF ACCOUNTS RECEIVABLE

We conducted an audit of Accounts Receivable for the month of February 2022. Our audit objectives

were to determine whether there were adequate controls and procedures in place to guarantee that

accounts receivables were properly documented, related allowances for doubtful accounts are

appropriately calculated and collection and write-off processes are adequately managed.

Audit Findings summary

Our audit disclosed that ONI Cosmetics must put in a lot more effort in the areas of collecting

receivables, aging receivables, organizing customer list and providing documentation for how

allowances are computed. Furthermore, more extensive reconciliations should be performed on a regular

basis, and the overall process would benefit from more complete documented policies and procedures.

Audit findings report to the board of directors Page|1

OBJECTIVES, SCOPE, AND METHODOLOGY

The primary objective of our audit was to determine whether there are adequate controls and
procedures in place to ensure that accounts and notes receivables are properly recorded, related
allowances for doubtful accounts are appropriately calculated and collection and write-off processes are
adequately managed.

Our audit included ONI Cosmetics receivables for the month of February 2022. The audit
included the review of 50 accounts receivable as of February 2022. ONI Cosmetic’s unaudited gross
receivable balance was ₱ 638,000 net of allowance for doubtful accounts of ₱ 604,500. The audit
included tests of the accounting records and such other auditing procedures as we considered
necessary.

OUR AUDIT APPROACH

The objective in conducting this audit was to see if there are enough controls and procedures in
place to guarantee that accounts receivables are handled properly. To attain these the audit procedures
established and implemented are:

 Test invoices listed in receivable report

 Investigate reconciling items
 Confirm accounts receivable
 Assess the allowance for doubtful accounts.
 Review credit memos

The auditors made an accounts receivable database analysis to investigate the number of
customers, their information and account balances. This procedure ensures that all accounts are
properly documented, and all invoices are encoded. This is necessary to compare them to supporting
documentation to see if they were billed in the correct amounts, to the correct customers, and on the
correct dates.
 The audited analysis report were mostly derived from utilizing Microsoft excel establishing
analysis through VLOOK UP function for identifying credit limits and discount percentage ,
conditional formatting for discussion and pivot tables for aging report.

AUDIT FINDINGS
Based on our audit, ONI Cosmetics must put in a lot more effort in the areas of collecting
receivables, aging receivables, organizing customer list, and providing documentation for how
allowances are computed. Furthermore, more extensive reconciliations should be performed on a
regular basis, and the overall process would benefit from more complete documented policies and
procedure.

Details of our findings are as follows:

1. UNRECORDED CUSTOMER ACCOUNTS WITH SUBSTANTIAL BALANCE

Some customer accounts were not recorded in the company’s customer list. Specifically, we found
the following customer accounts:

a. Account AR0020 amounting to P 21,500

b. Account AR0019 amounting to P 1,800 and
c. Account AR0014 amounting to P10,200.

Since these accounts were not recorded in the customer list, not credit limit is enacted upon. These
accounts might not be vetted through legitimate process which is an internal issue concerning accounts
receivable balances and how Oni Cosmetics issue credit.

2. CHARGING DIFFERENT SENIOR CITIZEN DISCOUNTS

Audit findings report to the board of directors Page|3

 Oni Cosmetics erroneously deduct senior citizen discounts with prior verification of such claim.
Which resulted to varying discount rates whereas several accounts enjoy higher discount compared to
who had none. The discount percentage ranges from 1.03% up to 17.86%.

Customer Name AR Balance SC Discount Percentage (%)

Potter, Harry ₱39,900.00 1.03%
Granger, Hermione ₱47,300.00 0.00%
Weasley, Ron ₱2,000.00 17.86%
Longbottom, Neville ₱44,000.00 0.00%
Malfoy, Draco ₱9,900.00 4.51%
Weasley, Ginny ₱15,600.00 9.04%
Pipay Kikay Store ₱118,000.00 0.00%
Human Nature Store ₱67,100.00 0.00%
Chie's Makeup ₱8,100.00 17.86%
Molina Glam ₱28,500.00 1.25%
Mendiola, Nikki ₱51,800.00 0.00%
#N/A ₱10,200.00 17.86%
#N/A ₱1,800.00 17.86%
#N/A ₱21,500.00 0.00%

3. ACCOUNTS PURCHASED BEYOND CREDIT LIMIT

There are credit or accounts receivable balances which is greater than their credit limit which calls
for strict credit policy. Specifically, we found the following accounts exceeding their credit limit.

a. Account AR0002 exceeding P17,300

b. Account AR0006 exceeding P600
c. Account AR0007 exceeding P68,000
d. Account AR0008 exceeding P15,100 and
e. Account AR00011 exceeding P9,800

AR number Customer Name AR Balance Credit Limit AR Balance - Credit Limit

AR0001 Potter, Harry ₱39,900.00 ₱40,000.00 -₱100.00
AR0002 Granger, Hermione ₱47,300.00 ₱30,000.00 ₱17,300.00
AR0003 Weasley, Ron ₱2,000.00 ₱15,000.00 -₱13,000.00
AR0004 Longbottom, Neville ₱44,000.00 ₱70,000.00 -₱26,000.00
AR0005 Malfoy, Draco ₱9,900.00 ₱30,000.00 -₱20,100.00
AR0006 Weasley, Ginny ₱15,600.00 ₱15,000.00 ₱600.00
 AR0007 Pipay Kikay Store ₱118,000.00 ₱50,000.00 ₱68,000.00
AR0008 Human Nature Store ₱67,100.00 ₱52,000.00 ₱15,100.00
AR0009 Chie's Makeup ₱8,100.00 ₱21,000.00 -₱12,900.00
AR0010 Molina Glam ₱28,500.00 ₱60,000.00 -₱31,500.00
AR0011 Mendiola, Nikki ₱51,800.00 ₱42,000.00 ₱9,800.00
AR0014 #N/A ₱10,200.00 #N/A #N/A
AR0019 #N/A ₱1,800.00 #N/A #N/A
AR0020 #N/A ₱21,500.00 #N/A #N/A

Audit findings report to the board of directors Page|5